Summary of Plant Extract Industry Characteristics

(1) Economic cyclicality

One of the main application areas of plant extracts is health care products, and the latter has a positive correlation with the national macroeconomic operating trend.

During the economic recovery and prosperity phase, the economy is active, commodities sell well, production of enterprises tends to rise, unemployment rate decreases, people's disposable income increases, and the demand for health care products is more robust;

While during the recession and depression phase, the market is cold, orders are insufficient, production shrinks, unemployment rate rises, and the contraction of disposable income of residents restricts the demand for health care products.

(2) Technicality

The plant extract industry has high technical requirements. The development stage of new products requires profound theoretical knowledge and long-term practical experience as a foundation;

The production stage of products, borrowing advanced extraction processes and equipment can not only significantly improve the quality of extract products, but also improve the utilization rate of raw materials, reduce raw material waste and lower production costs.

(3) Industrial concentration

The object of plant extraction is plants, and resource-rich regions are more conducive to industry development. Shaanxi, Hunan and Sichuan are currently the three main production areas of plant extracts in China.

These three provinces started early in the plant extraction industry and are relatively rich in medicinal plant resources, and have now formed certain scale advantages.

After more than 30 years of development, Shaanxi plant extract industry has nearly 600 related enterprises and more than 1,000 kinds of products, which has gradually become the wind vane of the development of the domestic industry.

Barriers in plant extract industry

(1)Barriers to market access

Plant extract is a very important intermediate product, and its quality directly affects the quality of downstream drugs and health products, so downstream enterprises, especially foreign customers, usually agree on the corresponding standards for the content of active ingredients, total bacterial count and pesticide residues.

In addition, the standards on the national side are "GB 4789.2-2010 National Standard for Food Safety, Microbiological Examination of Food, Determination of Total Bacterial Count", etc.

The competent authorities are strengthening the regulation of the plant extraction industry. Without professional equipment, talents and technology, it is usually difficult for new entrants to meet the standard requirements of national and foreign customers.

(2) Brand awareness

With the economic development and the improvement of people's income level, consumers' philosophy is gradually changing and their concern for product quality and brand awareness is rising.

Plant extracts have high technical content, and the downstream industry has high requirements for manufacturer awareness. Brand awareness is the result of long-term investment and operation in brand building, product quality, marketing services, etc.

It is usually difficult for new entrants in the industry to establish brand advantages in a short period of time.

(3) Process technology barriers

The production technology and process of plant extracts is an important reflection of the competitive strength of enterprises, as it involves many fields such as chemical, pharmaceutical, food and biological, which directly determines the quality of the company's products and then the sales of the company's products.

There are many plant extract companies in China, but those with advanced technology and core technology are few, because it requires technical talents, capital investment and long-term accumulation. It is usually difficult for new entrants in the industry to develop competitive technical strength in a relatively short period of time.

(4) Sales channel network

Sales channels are the channels or ways through which products are transferred from producers to consumers, and are a key part of a company's ability to sell its products and earn revenue.

The establishment of a solid sales channel not only requires excellent product quality, but also often requires the company's top management and sales staff to invest a lot of time and energy and material resources to maintain a good relationship with customers. This is also difficult for new entrants in the industry to accomplish in a short period of time.